Preparing for the Future of TCI

Thirty years after starting TCI in a spare bedroom in my home in Tucson, Arizona, I’m getting ready to retire. TCI was launched on an admittedly quirky notion that I could help people manage their money better, and over time it has grown from a kitchen-table enterprise to one of the largest and fastest-growing independent wealth management firms in the United States, I recently turned 67. Pretty soon, it will be time to go.

You might think that my retirement would be big news for TCI. Well, yes and no.

After years of working with successful business owners and entrepreneurs in the West, I’m aware that managing a founder’s retirement is a critical transition for any business, large or small. The process is typically full of drama, easy to botch and hard to pull off gracefully. Even the behemoths of the Fortune 500, with all their resources and consultants, struggle and often flounder for years with the transition.

How will TCI be different? That’s a good question for which there are a couple of answers.

Focusing on the Future Since Day One

For one, we have been planning for this transition almost since our beginnings in 1990. From the start, TCI’s other founding advisors and I set a lofty goal: we vowed to create a 100-year firm, providing trustworthy financial advice to generation after generation of clients. Achieving that would require a lot of things, including some ideas and practices about leadership and client service that were very different from those of our competitors.

At TCI, we have always wanted to be advisors to families, their children and their grandchildren. We set out to build something enduring and we demanded – just short of a blood oath – that everyone who joined the firm commit to that idea as well. Every one of TCI’s 80 employees, advisors and shareholders has taken that to heart and made it their mission.

I have been openly talking about my retirement with clients and colleagues for many years. The actual date hasn’t been set and likely won’t happen for another couple years. This is an important process that we intend to manage thoughtfully and openly. That, too, is a strategic move so everyone has plenty of time to prepare for the transition.

My discussions with clients about retirement and those of our other senior advisors have always been prefaced with an important caveat. We are promising them that our fiduciary responsibilities won’t end the day we log off our computer and leave the office for good. That, too, is unique in our industry and significant for the future of TCI.

Our company is structured to make good on those promises. Many of TCI’s employees are also shareholders in the company. That maintains and strengthens their bond with the firm throughout their careers and even after retirement. All of us have a long-term vested interest in a strong and successful TCI.

So, my retirement? All things considered, it is hardly headline news. Still, my departure is the first of a series of changes that will unfold over the next decade at TCI.

Within the next ten years, several other senior partners will retire. One of which is Doug Nelson; his Reno-based financial advisory company merged with TCI in 2007 in a strategic move that helped the combined firm develop new areas of expertise and diversify into new markets. Our departures will offer the biggest test yet of our determination to create a financial advisory firm that will last for a century. I’m confident we will succeed.

Founded to be Different

From the earliest days, I had some unconventional ideas about how to run a firm. TCI started out as The Conservative Investor. Our founding principles were, if anything, profoundly anti-Wall Street. Investing, in my view, shouldn’t be a swamp of secret language and hidden fees. That serves only to confuse clients and enrich brokers. TCI is about simplicity, transparency and straightforwardness.

I was also pretty frugal. I didn’t have a computer or any office furniture in that spare bedroom; I borrowed a chair from the kitchen. That helped keep our fees low. Clients saw value in the services, and over time, they came to appreciate the ideals and the culture. The business started to grow.

One by one, advisors who shared these ideas and values found their way to TCI and joined the team. Over time, as we grew, we knew our ambitions and ideals would demand an organizational structure that make our firm a rarity in our industry. We also knew that we’d need to foster a new kind of leadership and culture at TCI.

A lot of the responsibility for crafting the structure fell to John Stephens, M.D., a physician who started as a client then joined the firm in 1999 after earning his M.B.A. Among other things, John took our investment philosophy — low costs, simplicity, transparency — and created a detailed working blueprint for how best to manage clients’ individual portfolios.

TCI has always been a maverick in our industry. The reality is, at many other more traditional firms, the advisors operate as lone wolves guarding their territory and roaming on their own for new clients. They are loosely attached to their firm; there’s little incentive to work together with other advisors as a team. Clients rarely meet or interact with anyone but their advisor.

That’s why, for lack of a better alternative, clients of traditional firms embrace the “my guy syndrome” in which their financial well-being lies in the hands of a single, hopefully reliable, wise and long-lived advisor. When that advisor retires or suffers some unfortunate event such as an illness, clients are often left on their own to find a new advisor or, worse yet, handed off to pals in the office like so many baseball cards. That’s traumatic for clients. We don’t want that to ever happen to our clients at TCI.

TCI’s Team Approach

Thus, the first pillar of our foundation: teamwork. TCI’s 22 advisors are all part of the same team and clients see this from the start of their relationship with us. Over time, clients get to know and trust not only their advisor but also his or her associates and the legion of others – including the unsung heroes of the backroom – who help to manage the many aspects of their financial planning journey.

We want our clients to understand that TCI is not about one advisor–that’s why there have been different advisors highlighted throughout this story. When you hire TCI you’re hiring all of our resources and talent.

From the start, TCI was designed to be bigger than any one advisor or cabal of senior advisors. That’s why recruiting and developing new in-house talent is such a high priority for us. Many firms profess to do it; few make it happen because it is hard work and time-consuming.

At TCI, advisors are incentivized and recognized for their efforts in mentoring young advisors in the firm to help them develop their skills. That also means including them in meaningful interactions with clients so they can learn.

Such practices are profoundly different from the way most of our rivals operate and we proudly embrace being anti-Wall Street. As we see it, wisdom and experience are, of course, vitally important in our senior advisors, but younger people bring fresh new ideas to the table which are very valuable. That’s why we have always known that we need to sustain a culture within our firm that empowers the next generation of advisors.

In some instances, we will tell a client that we are going to punt a question to a younger advisor in the firm because that advisor has a keen mastery of the matter. In fact, we will ask the younger advisor to call the client directly. At other, more traditional firms, a senior advisor would rarely allow anyone, let alone a younger advisor, talk to a client for fear of losing credibility.

The TCI Way

We don’t see it that way. Bringing younger advisors into the relationship sends a powerful message to our clients. It says we trust these young people and value their opinions. All of our senior folks have taken this same approach, mentoring the next generation of talented advisors and staff. There’s a deeper message, too, in this kind of careful apprenticeship. What we are really saying to clients is that you will be in good and capable hands when the time comes for us to leave TCI.

What we are doing at TCI, effectively, is practicing what we preach to clients. We urge our clients to be open and honest about money and long-term planning within the family; we embrace that kind of transparency at TCI. We stress the importance of careful planning for clients; TCI talks openly about things such as succession that other firms usually keep shrouded in secrecy. We press clients to involve children and grandchildren in the process of managing family resources.

We’re mapping out a blueprint for the future of this firm. John Stephens, TCI’s CEO, sums it up in this way: “We’ve made a commitment to a future that sustains the independence and integrity of this firm. Our goal is to create a home for employees, advisors and clients for whom these practices and values ring true.”

As for me, I can’t wait to see what TCI has become in the year 2035.